eBay Looks Like a Lousy Bet Here

by Serge Berger | April 19, 2013 1:41 am

Serge Berger is the head trader and investment strategist for The Steady Trader[1]. Sign up for his free weekly newsletter here[2].

eBay (NASDAQ:EBAY[3]) — After reporting earnings Thursday (the company beat on earnings slightly but outlook fell short of expectations), the stock tumbled almost 6% on the day, confirming the April highs as an important medium-term top. Both the longer- and shorter-term charts are now flashing warning signs.

The stock’s all-time high occurred in December 2004, at $59 and change. This month, it came within roughly $1 of those highs, which, from where I sit, counts as a retest.

The longer-term chart looking back to 2009 shows a stock that behaved well technically — moving off its lows, slowly but surely basing at higher levels, and subsequently breaking out past those resistance levels.

In early 2012, EBAY broke out past a key resistance level and has been in a stellar uptrend ever since.

Closer up on the daily chart, the stock’s marginal breakout to new 2013 highs earlier this month ended up being a classic breakout-fake out for those giddy enough to chase a stock into the stratosphere. Thursday’s post-earnings breakaway gap lower confirmed the April top.

From here, while immediate-term oversold, EBAY likely will be steering toward its 200-day simple moving average, which, more importantly, coincides with the stock’s longer-term steep uptrend. The reaction around the $50 mark will thus be of great importance.

Given these points, I am staying away from the long side of the stock, and if anything, may be looking to play it from the short side.